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Hostess’s iconic Twinkie emerged from liquidation as a strong, competitive brand. But liquidation of GM and Chrysler’s brands brought fears of larger economic collapse. (Robyn Beck\/AFP\/Getty Images)<\/p>\n
What if General Motors and Chrysler had not received government bailouts? Would the Detroit auto industry have disappeared, or emerged a lean, mean, fighting machine?<\/p>\n
Observe the simple Twinkie for insight into what might have been.<\/p>\n
With products as iconic as the Jeep and Corvette and a bitter union history to boot, bakery giant Hostess Brands, Inc. last year entered bankruptcy and never came out. Yet today, its Twinkie and Wonder Bread products are back on the shelves and its non-union business model is modernized for the 21st century.<\/p>\n
But if Hostess\u2019s liquidation lends ammunition to free-market advocates who argued that Chapter 11 might have produced a more competitive Detroit, leading bankruptcy experts say that Hostess is a sobering lesson in how different auto-making is from other industries \u2014 and how painful Detroit\u2019s collapse would have been. Without a government bailout, GM and Chrysler likely would have been liquidated, their brands sold to foreign competitors and the U.S. economy would have suffered a devastating blow.<\/p>\n
\u201cHostess was liquidated. And I believe that, if the federal government had not intervened, that the auto companies would have been liquidated as well,\u201d says investor Wilbur Ross,\u00a0legendary CEO<\/a>\u00a0of WL Ross & Co., who revived once-bankrupt steel behemoths Bethlehem and LTV. \u201cA lot of jobs would have been lost, a lot of suppliers would have gone bankrupt, and the brands that survived would still be unionized.\u201d<\/p>\n Ross says Hostess, founded in 1913, is a demonstration of brand durability even in bankruptcy, but that the food-making process is fundamentally different from building a car.<\/p>\n After entering bankruptcy\u00a0in January 2012<\/a>, Hostess was unable to get agreement from its bakery union and went into liquidation nearly a year later, locking its doors on 18,000 employees. But its brands did not die. Wonder Bread was sold to Flower Foods, McKee Foods snapped up Devil Dogs and Yodels, and private equity firm Apollo and\u00a0investor Metropoulos & Co.<\/a>\u00a0bought Twinkies and other Hostess cakes.<\/p>\n This summer, a revamped Hostess Brands, LLC had Twinkies back in stores, its bakeries consolidated from 11 to four, and a non-union workforce streamlined of work rules and pension overhead. Industry analyst Natalie Everett tells CNN that\u00a0only 25 percent<\/a>\u00a0of its jobs will return.<\/p>\n The parallels with GM and Chrysler are irresistible. Old companies. Strong brands. Uncompetitive union work rules.\u00a0Unsustainable pensions costs<\/a>. Hidebound management.<\/p>\n \u201cHostess was making a bad product, then the market changed, and their structure wasn\u2019t sustainable,\u201d says Mark Bloch,\u00a0a senior partner and veteran labor lawyer<\/a>\u00a0with Walter Haverfield in Cleveland.<\/p>\n